Relationships Gone Wild

All across the country, in markets large and small, a drama once considered unimaginable is unfolding in ways that are shaking the confidence of many radiology practitioners and creating tension within the ranks of hospital administrators. The issue relates to the unilateral breaking apart of longstanding exclusive contracts with radiology groups, contracts set in motion by group founders, many years prior, that were seemingly bulletproof and tantamount to annuities.

In Orlando, Florida; Toledo, Ohio; San Antonio, Texas; Roanoke, Virginia; and, most recently, Sacramento, California, radiology-hospital relationships that have been part of the fabric of these communities’ respective institutions for decades have melted down, seemingly overnight. Some of these changes have had no shortage of acrimony and bitterness, and this has damaged the entire local health-care community. Friendships have been poisoned; careers, ruined.
What is going on here?

The answer is not an easy one, and in fact, these practice–hospital relationships came apart for different reasons, some obvious and some not so obvious. In looking for a common thread among these and other, similar relationships currently under stress or experiencing some dysfunction, however, one finds a pattern that emerges and that relates to the shifting cultural landscape now manifest in the health-care arena. The very essence of relationships has changed dramatically, requiring new skills and empathy if relationships are to succeed.

First, some perspective: All businesses, products, and markets evolve, over time, according to some fairly predictable patterns and benchmarks seen throughout the life of the enterprise. These are subject to cycles, and the cycles themselves are subject to certain traits and criteria; the market’s development can be traced by these visible signs and conditions. Among these milestones is a market that moves from a growth phase to a phase identified as maturity.

Emergence of Commoditization

A mature market (which is characterized by broad adoption, acceptance, rational pricing, supply/demand balance, and so on) is also marked by the emergence of commoditization as a driving factor in the exchange of goods and services. The only thing that breaks through the commoditization perception is true differentiation: a completely unique value proposition that can set your enterprise apart from the sea of similar products or services.

Players in mature markets who are unprepared for the new demands placed on them are doomed to be eclipsed or marginalized by those who have prepared for, and who understand, such a change in their marketplace. Further, the players who embrace (or are catalysts for) such changes are those who will truly thrive.

Such is the case with the changing nature of the hospital–radiology relationship, which now exists within a maturing medical-imaging marketplace. Hospitals are customers of the radiology groups, and these customers have been sending messages, for some time now, that their expectations from those under contract have changed significantly. Sometimes, these messages have been subtle (benign neglect), and sometimes they’ve been downright confrontational (contentious contract negotiations that turn toxic). A few have resulted in termination of long-standing contracts and relationships.

Hospital executives have weighed the risks associated with such a strategy of confrontation and have concluded that they have many more options today than they did just five years ago. They seem more than willing to excise what they perceive as a problem provider, especially one that they feel is not meeting the strategic needs of the institution, one they view as more competitor than partner, or one that they see as draining revenue that the hospital views as rightfully its own. They are definitely no longer willing to be taken for granted.

For their part, many hospital executives are dispassionate about the very real benefits to be derived from cultivating a new type of relationship that takes advantage of the history and stability that a long-standing, quality-oriented radiology practice brings to the institution. Contrary to the outward appearance of commoditization of radiology, all groups are not made the same way, and some are manifestly better than others.